London’s High Court has ruled that Alex Palou must pay more than $12 million in damages to McLaren Racing after breaching his IndyCar contract. The decision was delivered on January 23, 2026. It followed a five-week trial into the breakdown of a multi-year agreement between the IndyCar champion and the British team.
According to Scott Mitchell-Malm of The Race, the court found that Palou failed to honor a deal that would have seen him race for McLaren in IndyCar while continuing as a Formula 1 test and reserve driver.
While McLaren did not succeed on every claim, the judge agreed that Palou’s actions caused measurable commercial damage to the team’s IndyCar program.
Contract dispute traced back to 2022 agreement
The case began in 2022 when Palou signed a contract to join McLaren’s IndyCar team. At the time, Palou was racing for Chip Ganassi Racing. Ganassi later exercised an option to retain him, which blocked the immediate move and triggered mediation.
That process led to a revised agreement. Palou would remain with Ganassi for the 2023 season, serve as McLaren’s Formula 1 reserve and test driver, then join McLaren’s IndyCar lineup from 2024 through 2026, with an option for 2027.
Palou later chose not to join McLaren and admitted breaching the contract. His defense argued that McLaren misled him about his Formula 1 prospects and claimed several areas of the team’s financial demands were inflated. The court rejected most of those arguments as they related to IndyCar operations.
Why McLaren was awarded more than $12 million
McLaren originally pursued close to $30 million in damages but later narrowed its claim. The court dismissed all Formula 1-related claims, totaling nearly $15 million, ruling that damages could be tied only to IndyCar losses.
As reported by The Race, the largest award stemmed from McLaren’s sponsorship agreement with NTT, which had been negotiated with Palou as the named driver. The judge awarded $5.38 million for the 2024–2026 seasons and an additional $950,000 tied to 2027.
The court also approved just over $2 million in lost performance-based revenue. A further $2 million to $2.5 million linked to other sponsorship losses will be finalized later.
McLaren also succeeded in a $1.3 million claim tied to Pato O’Ward’s salary increase. The team argued the raise became necessary to retain a top driver after Palou withdrew. Another $500,000 was awarded for payments McLaren would have received from General Motors for running what the contract defined as an “A-level driver.”
Statements from Alex Palou, McLaren, and Ganassi
McLaren CEO Zak Brown said the ruling confirmed the team met its obligations. “As the ruling shows, we clearly demonstrated that we fulfilled every single contractual obligation towards Alex and fully honoured what had been agreed. The court recognized the very significant commercial impact and disruption our business suffered as a result of Alex’s breach of contract.”
Palou said he was disappointed by the outcome. “The court’s decision shows the claims against me were completely overblown. It’s disappointing that so much time and cost was spent fighting these claims… simply because I chose not to drive for McLaren after I learned they wouldn’t be able to give me an F1 drive.”
Chip Ganassi Racing also issued a statement backing its driver, saying Palou has the team’s full support and that its focus remains on racing and winning.
“Alex has our full support, now and always. We know the character of our driver and the strength of our team, and nothing changes that. While we respect the legal process, our focus is exactly where it should be: on racing, on winning, and on doing what this organization has always done best, competing at the highest level.”
Court Awards Over $12 Million in Damages in Lawsuit Against IndyCar Champion